My Crony Is An Infant

Kamal Nath, our anti-commerce minister, has spoken of the need to “protect infant industries” from foreign competition. This includes automobiles – a sector dominated entirely by foreign firms. This was said in Geneva, at the WTO, on taxpayer money.

In the meantime, beauty queen and actress Sushmita Sen has had her SUVs impounded by the police, who are conducting forensic examinations on the cars. (This, while forensic tests in murder cases are not conducted: recall Scarlett Keeling.)

Sen apparently fudged the age of the cars in order to pay lower duties. Both SUVs were bought second-hand in Dubai – and the customs are asking 20 lakhs (2 million) rupees in duty. For what? To “protect infant industries,” of course!

Would every Indian not gain if second-hand cars are allowed in duty-free?

Is the customs department a revenue collector or a trade blocker?

There is no revenue collection when tariffs are fixed so high that all trade stops. So the customs department is nothing but a trade blocker. Why is it blocking trade? To protect “infant industries,” of course.

The basic idea is corrupt. The news report mentions that the major Indian chambers of commerce, like FICCI and CII, are with the minister in this. These corrupt businessmen, aged cronies of the state posing as infants, will block their competitors from entering the market. The consumer will get fleeced.

What is worse is that Kamal Nath is quite prepared to let the WTO fail if the demands of his cronies are not met. The resulting breakdown of international trade will hurt all Indians – and hurt the rest of the world too. Global prosperity will fall.

The “infant industry argument” for protection was first expounded by a German, Friedrich List, in the mid-19th century. It was used by German nationalists to promote an aggressive economic nationalism that led to two World Wars – simply because international inter-dependence via trade, an idea so carefully nurtured by Cobden, Bright and Bastiat in the first half of the 19th century, broke down. The fallacious infant industry argument caused wars – because it pitted one nation’s economic interests against that of all the others.

In India, the “infant industry” argument was used by Nehru and his successors to protect Birla’s Ambassador, Bajaj’s scooter and Tata’s trucks. All these infants are now senile – but still walking around with government-supplied poopcees in their toothless mouths.

The correct way to look at these issues is from the viewpoint of the non-competitor. If you examine the matter closely, you will see that every non-competitor gains when trade is free. When the second-hand SUV sells for peanuts, Tata Motors might go belly-up, but every producer of everything else (except cars) gains, because the sale creates the demand for everything else.

If Sushmita Sen did not have to pay 50 lakhs for her used SUV, but only 5 lakhs, the money saved would be spent on other things, like plasma TVs – and everyone else would gain. This is the basic lesson from Jean-Baptiste Say’s “Law of Markets,” rightly understood: The sale of X creates the demand for all non-X.

Seen in this light, it becomes obvious that Kamal Nath’s neo-protectionism in not only anti-national, it is anti-world as well. It will make Indians poorer; it will make the world poorer too. It will add to global economic conflicts, and foment wars.

We have had protectionism for 60 years – and lost. This loser and his gang of losers will make us lose again.

When will they ever learn?

When will we?

And, of course, they want to teach!